Staying Out of Trouble

William J. Augello was one of the country’s foremost transportation lawyers and a champion of shippers’ rights. In this column, we attempt to answer readers’ questions as we believe he would. Previous columns, including Bill Augello’s, may be found in the ‘Content Library’ on the PARCEL website (www.PARCELindustry.com).

In the last issue of PARCEL, we took a look at two areas where a shipper can get ‘in trouble:’ packaging and labeling. In this column, we will continue with a look at three more.

But before getting into the details of this topic, I would like to take this opportunity to remind you that I will be presenting an all-day pre-conference workshop on Monday, October 6 at the PARCEL Forum. This special course is designed to provide a basic working knowledge of the laws and regulations affecting the supply chain, with a special emphasis on parcel shipping.

The details may be found at www.PARCELforum.com. Attendees will receive a copy of William J. Augello’s Transportation, Logistics and the Law. I am really looking forward to this event as it will provide me with an opportunity to meet the readers of this column and to better understand the unique concerns of the parcel shipper. So, if you have a question you’d like answered in this column, this would be the time to ask!

A Quick Recap
As you will remember from the previous issue, two major ‘hotspots’ for shippers include packaging and marking/labeling. A consignor’s duty to properly package the products being shipped typically arises from a carrier’s packaging requirements, which are ‘incorporated by reference’ by the bill of lading or other shipping document issued by the carrier when receiving the goods. Parcel carriers such as UPS, FedEx and DHL all have detailed requirements set forth in their own service guides. Furthermore, many less-than-truckload (LTL) carriers participate in the National Motor Freight Classification (NMFC), which also has packaging requirements.

When a consignor fails to adhere to those requirements, no law is being broken; however, the consignor (or its consignee customer) may not be able to recover a damage claim as a carrier would in all likelihood deny the claim for ‘insufficient packaging.’ Failure to comply with a carrier’s packaging requirements can also lead to increased freight charges.

In terms of marking/labeling, shippers can also get into trouble by failure to properly mark or identify the goods being shipped. In addition to packaging requirements, the NMFC contains requirements relating to certain pictorial symbols to be placed on the outside of the package which, if not followed, would be considered to be ‘insufficient packaging’ in the context of a loss or damage claim.

The consignor also has the duty to properly describe the goods on the bill of lading. At least one case has held that where a shipper had intentionally mis-described the goods to obtain a lower rate, the shipper was unable to recover the full value of a lost shipment.

All right; hopefully that was a good enough refresher course. Let’s now move on to today’s lesson and examine the impact the terms of sale, duty to accept goods on delivery and mitigate loss, and liability for personal injury and wrongful death can have on a shipper.

Terms of Sale
The terms of sale for a product entered into between the seller consignor and buyer consignee create obligations for both parties. Amongst other things, the terms of sale will determine who has the responsibility for payment of the freight charges and which party bears the risk of loss or damage to the goods in transit. For instance, when the term of sale is ‘FOB origin,’ most people understand that this means that the consignee will be responsible for the payment of the carrier’s freight charges.

Less well-known is the fact that even though the consignor will not be paying the carrier’s charges, the consignor has a duty under the Uniform Commercial Code (UCC) to make reasonable arrangements for transportation. In this day and age where most carriers have provisions in their tariffs to limit their liability to less than full value, a consignor seller could become liable to its consignee customer for breach of the sales contract if the consignor selected a carrier whose limit of liability was insufficient to cover the value of any goods damaged in transit.

Duty to Accept Goods on Delivery and Mitigate Loss
In my practice, I have observed a growing tendency for consignees to refuse to accept a shipment because a part of a load was damaged or even when the consignee forms an opinion that the product may have been damaged. However, the law places a duty upon consignees to accept damaged goods unless the shipment is ‘practically worthless’ or ‘totally worthless.’

The collateral consequences of a wrongful rejection could be that neither the consignor nor consignee could recover from the carrier for a loss and damage claim. For instance, a carrier may have disposed of the goods before an adequate inspection could be made. Problems can also arise when allegedly damaged goods are returned via a different routing or carrier, and it cannot be verified whether the damage occurred on the outbound or on the return trip. Such rejections could also lead to a claim by the consignor against the consignee for breach of contract, for example, if the purchase order or other sales document contained certain procedures which the consignee failed to follow.

Liability for Personal Injury and Wrongful Death
There are various circumstances that could give rise to a lawsuit by a third party against a shipper for injury or death. In the past, there have been many cases involving an allegation of improper loading of the cargo causing an accident and, in particular, situations where the consignor, as opposed to the carrier, takes total responsibility for loading a trailer full of packages to be picked up by the carrier. When a consignee dock worker, carrier driver or the occupants of a passenger vehicle on a highway are subsequently injured, the consignor can be held liable if it is determined that the consignor did indeed improperly load the trailer.

Another type of liability for a consignor or consignee is ‘vicarious liability’ when a truck is involved in a highway accident. Generally speaking, these concerns relate more to entities hiring truckload carriers as opposed to a ‘major’ package carrier or LTL carrier. An example of such a case is Schram v. Foster, where the judge held that C.H. Robinson, a major broker, could be held liable if the jury found that it had been negligent in selecting the carrier.

Conclusion
Not all of the problems in transportation are the fault of the carriers. The issues outlined here are truly the ‘tip of the iceberg.’ If any of the circumstances or examples discussed here or in the last issue relate to your company, immediate steps should be initiated to ensure compliance with legal and contractual requirements and to minimize potential liability. All for now!

Brent Wm. Primus, J.D., currently serves as the General Counsel for the Freight Transportation Consultants Association and is the CEO of transportlawtexts, inc. as well as Primus Law Office, P.A. Your questions are always welcome at brent@transportlawtexts.com.